Introduction: Employee Provident Fund

The Employee Provident Fund or EPF or PF is a saving plan introduced by the government for the financial support after retirement. This is applicable for all salaried employees in India.

Employees’ Provident Fund (EPF) is regulated under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and the authority which regulates this act is Employees Provident Fund Organisation (EPFO). EPF is an advantage to the employees which will support them at the time of retirement. PF can be considered as a perk provided to employees by the employer over basic remuneration.

It is mandatory for all the employer to register their entity under EPFO if they have 20 or more employers appointed in their organization.

Important for Registration

It is mandatory for all employers to register their entity under EPFO if they have 20 or more employers appointed in their organization.

This registration involves organizations contributing a fixed amount towards Employees against their PF out of employee salary and wages.

Employees’ Provident Fund (EPF) is regulated under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and the authority which regulates this act is Employees Provident Fund Organisation (EPFO).  According to this act, if an employer or any organisation fails to get EPF registration or represents false of facts in order to avoid PF payment, then the employer shall be liable for a penalty of INR 5,000/-

Eligibility

PF registration for Employer is mandatory:-

• Required by all types of entities like private limited, proprietorship, partnership etc.
• Mandatory for all the organisation having employees more then 20
• Government organisation under Central government
• Factory having 20 or more people

Benefits

• Risk coverage for the employees
• Same PF account can be carried forward to another organisation
• Employee Deposit Insurance Scheme under which 0.5% of the salary is deducted from the life insurance premium.
• urgent availability of funds
• Covers pension.

Components of PF Format

PF number is 22 digit code and it looks like- AA/ABC/0000000/123/0000000.

Components in the PF number format include-

• AA: First 2 characters represents Regional Office code
• ABC: Next 3 characters represents the Regional Office / Sub-regional Office code
• 0000000: Next 7 digits represent employer’s registration code PF
• 123: Next 3 digits tell the extension assigned to the employer (if any)
• 0000000: Last 7 digits represent the employee’s PF account number

Contribution towards EPF-

• Contributed on the basic pay of the employee.
• Contribution from the employee’s salary is 12% 
• Employer also contribute same amount which also includes 8.33% towards Employee Pension Scheme (EPS)

Documents required-

• PAN card of the company
• Certificate of Registration
• Copy of the cancelled cheque;
• Partnership Deed/ MOA and AOA/ LLP deed/ Society or Trust deed
• PAN card and Aadhaar Card of the Directors or Partners or Proprietor
• GST certificate
• List of the employees with date of joining
• Name of the bank and the Bank’s address where the entity’s bank account
• DSC

Registration Procedure

• Register the organization with EPFO, login details will be provided
• Register DSC
• Provide the Employer’s Details -

• First Name – name of the company same as mentioned in Income Tax Department
• Employer PAN
• Select user Name
• Mention a Hint Question/ Answer
• Enter PIN sent on the registered mobile number
• Activate E-mail link

Types of Provident Fund (PF)

• Statutory Provident Fund (SPF) – It is regulated under the Provident Funds Act, 1925 and maintained by the Government and Semi-Government organizations, local authorities, railways, universities and educational institutions.
• Recognized Provident Fund (RPF) – An organization that is recognized by the Commissioner of Income Tax is called a recognized provident fund. Any organizations having 20 or more apply for RPF. Maximum salaried individuals contribute to this type of Provident Fund.
• Unrecognized Provident Fund (UPF) – This includes organisation that are not recognized by Commissioner of Income Tax.
• Public Provident Fund (PPF) – It is controlled by the Central Government where any member (employee or employer) can open a PF account at the State Bank of India or other nationalized banks.
• A minimum of INR 500 is required to open PPF and maximum it can have INR150,000 deposit per annum. There will be a certain amount of interest which will be credited every year.

Tax Treatment of Provident Fund

Conclusion

From the above discussion, it’s clear that the registration under EPF is not only mandatory but also provides tax benefits to both the employer and the employee. The EPF interest rate now is at 8.5% for the FY2019-2020. If you want to register under EPF, feel free to contact us.